George Osborne may lack Matt Smith's schoolboy charm – not to mention his sonic screwdriver – but if Tuesday's much-trailed emergency budget is any indication, the Doctor isn't the only one journeying back to the future. Indeed, if the chancellor's red box were a Tardis, it would be set firmly on 1937. That was when Franklin Roosevelt decided that the Great Depression was over, and he needed to get a grip on America's terrifying federal deficit (at the time about 4.5% of GDP. Just for reference, the current figure for Great Britain is 11.4%).

FDR's New Deal broke with the past in a number of ways: for the first time in American history, the federal government assumed responsibility for providing jobs. New programmes came into being almost overnight to stabilise farm incomes, finance home ownership, regulate banks and the securities industry and bring affordable electricity to millions of homes. Not all of these innovations were successful. But none of them would have been possible without Roosevelt's willingness to defy the economic orthodoxy of the day – then known in the US, as in Britain, as "the Treasury view" – which held that deficit spending was not just evil but ineffectual.

The US treasurer in 1937 was Henry Morgenthau, a gentleman apple farmer who, as historian Alan Brinkley points out, owed his job "largely to an accident of geography: he was a neighbour of Franklin Roosevelt in Dutchess County, New York." Morgenthau wasn't a total waste of space; he made a genuine pest of himself trying to get his friend to notice the Nazi Holocaust. But even his admirers would hesitate to call him a great economist, and after FDR's landslide reelection in 1936, Morgenthau made cutting the federal deficit his personal cause.

By the fall of 1937, he'd convinced the president that though "the patient might scream a bit", it was time to "throw away the crutches". Not everyone agreed. Marriner Eccles, a Mormon banker who thought along the same lines as John Maynard Keynes, warned that the recovery was too fragile; so did the tiny handful of US economists who'd actually heard of Keynes. But Roosevelt, like David Cameron, believed that a balanced budget was a sign of fiscal virtue, and hundreds of government programmes were cut back or eliminated.

Just as today, austerity was seen as inevitable. Besides, as Business Week observed, over the 1937 4 July weekend "railroads put on extra trains. Mountain and seashore hotels packed them in." The crisis had passed. Even the Nation began to fret about "an unbalanced budget" leading to "uncontrolled inflation."

Instead, FDR's attempt to balance the budget threw the US back into what became known as the "Roosevelt Recession": by the end of 1937, industrial production was down 40%, incomes were down 13% and 4 million more workers were unemployed. At the end of the year, Maury Maverick, a New Deal congressman from Texas, worried that "we have pulled all of the rabbits out of the hat. There are no more rabbits."

Roosevelt reversed course in 1938-39, but the damage wouldn't really be undone until the second world war made budget deficits respectable again.

Though published in 1936, and of little direct influence on the New Deal, Keynes's General Theory of Employment, Interest and Money was long thought to explain why FDR's willingness to use government funds to stimulate a faltering economy had worked – and why the rapid withdrawal of those funds in 1937 had been such a disaster. But as today's headlines show, Keynes, though still influential in US policy circles (and among neo-Keynsians like Paul Krugman), seems to be regarded as a historical curiosity here in Britain, where the "Treasury view" of the 1930s is, once again, the Treasury view. (Marshall Auerback, an economics blogger and investment manager, calls this the return of "Flat Earth economics". But then, Auerback also thinks the Conservatives have drawn the wrong lessons from Canada as well.)

Of course, some people still argue "you can't spend your way out of a recession." Milton Friedman believed that – and so, it would seem, does George Osborne. But when Labour was in power, neither Gordon Brown nor Alistair Darling ever offered a robust rationale for counter-cyclical spending. Instead, voters were offered the choice between cuts with reluctance and cuts with relish. We're about to get the relish.

Will it work? Well, one of the things that keep history from being a science is the impossibility of duplicating past conditions. But if the experience of 1937 is any guide, we're in for a very bumpy ride.